Credit Suisse pay cuts fail to win shareholder advisers

Switzerland - Credit Suisse Group AG continues to face
opposition to its pay plans from major shareholder advisory groups even
after executives and directors offered to forgo some of their compensation.

Glass Lewis & Co. and Institutional Shareholder Services
Inc. both reject the bank’s new pay proposal for the board. ISS remains opposed
to the bonus packages for executives, while Glass Lewis expressed reservations
but said the voluntary cuts merit shareholder support.

Credit Suisse has come under fire from several shareholder
groups over pay packages after the bank posted a second annual loss. In
response to the backlash, executives and directors volunteered to give up some
compensation when shareholders meet next week to consider these and other
proposals.

Swiss laws introduced in 2015 require companies listed in
the country to give shareholders a binding annual vote on board and executive
pay. Credit Suisse last year won backing despite opposition from advisory
groups including Glass Lewis. Local rival UBS Group AG, which is holding its
annual meeting next month, has received support from both Glass Lewis and ISS
for its compensation proposals.

‘Flawed Process’

Credit Suisse’s stock fell 33 percent in 2016, with market
turmoil, surprise trading losses and legal cases sapping confidence in a costly
turnaround plan. Charges tied to a legal settlement over its crisis-era
mortgage securities business pushed the bank into a second annual loss.

Executives are offering to forgo 40 percent of their
bonuses, leaving them with about 48 million francs ($48 million), 17 million
francs in short-term incentive pay and 31.2 million in bonuses tied to
long-term goals. The board has renounced plans to raises its maximum
compensation to 12.5 million francs from 12 million francs.

“The decisions of the board and executive board represent
positive steps that acknowledge the impact of the 2016 net loss on
shareholders,” ISS said in an emailed report Tuesday. “However, they come at
the end of a flawed process where shareholder interests were not adequately
taken into consideration.”

Glass Lewis said that while the voluntary cuts are a
positive response to shareholder discontent and should general some goodwill,
“we also find that this is a case of ‘too little, too late.”’

CEO Pay

At 3 million francs, Thiam’s salary remains “significantly
higher” than that of his predecessor, Brady Dougan, Glass Lewis said.
Under the new proposals, Thiam would receive a total compensation of
10.24 million francs, instead of the previously proposed 11.9 million francs.
Even after the cut, he would still be the best-paid CEO among his European
peers after UBS’s Sergio Ermotti.

“A situation in which top executives feel obliged to
volunteer to reduce their own earned awards two weeks prior to an annual
meeting facing a shareholder revolt highlights the dysfunction of a
compensation program and a compensation committee that fail to adequately
consider shareholder interests,” Glass Lewis said.